What is staking and how does it work?

Maciej Zieliński

23 Mar 2022
What is staking and how does it work?

Many people see staking as an alternative to mining which requires technical knowledge. It is an activity where you don't have to own and look after complex equipment, but only store funds in a specific cryptocurrency wallet. This ensures the safety and smooth operation of a given blockchain network. Staking crypto is to put it simply, blocking cryptocurrencies, in order to receive awards and many benefits in the form of units of a given cryptocurrency. Most projects allow for staking of digital assets directly from a cryptocurrency portfolio. There are also exchanges that provide a staking service to users as part of their business offer. One such exchange is, for example, Binance. In order to fully understand staking wee need to understand how Proof of Stake (PoS) and Delegated Proof of Stake (DPoS) work.

What is Proof of Stake system (PoS)?

The Proof of Stake systemand staking crypto is a consensus mechanism which allows blockchains to save energy while maintaining proper decentralization. This consensus mechanism is designed to address the vulnerabilities and problems that exist in the Bitcoin network algorithm.

In the Bitcoin network, miners compete for who will be the fastest to solve a mathematical puzzle. The entity that is able to do so in the shortest time adds the block and receives remuneration in the form of BTC. The problem itself is related to the multiplicity of arbitrary calculations and the electricity required to do this, which is considered to be a major cost-negative.

It is worth stressing that there is a way to maintain network decentralization without incurring the high computing costs connected with solving puzzles. The solution is the Proof Stake, whose primary purpose is to validate blocks and use an "internal" investment (own cryptocurrency) instead of "external" investments (energy, crypto mining machines). Network users may “block” their coins. Afterwards, at different intervals, the protocol randomly assigns the right to approve the block to one of the users. The chance to be chosen doesn't depend on who creates a block or how quickly puzzles are solved. However, it depends on how many coins we are blocking. That is, the more wecapital we devote to this, the higher the chance we will be chosen. Another benefit of POS is that attacking a blockchain network is much more expensive because an effective attack would require owning at least 51% of all existing cryptocurrencies of a given blockchain. Of course, the cheaper and more accessible a given cryptocurrency is, the easier such an attack becomes. Hacking also has a greater impact on PoS management models than on PoW (proof of work). When a given network is hacked, miners lose more than just their cryptocurrency; they lose their place on the platform. This is a major problem that has led to the creation of the Delegated Proof of Stake (DPoS).

What is Delegated Proof of Stake (DPoS)?

Proof of Stake model also has an alternative option that was created in 2014 by Daniel Larimer. The method is referred to as Delegated Proof of Stake (DPoS). It was first tested as part of the BitShares blockchain, but shortly thereafter other networks started using this model as well.


The DPoS activity can be compared to shares held in a company. This method allows users to treat their cryptocurrency as votes whose force is proportional to their number. These votes are used to select delegates whose jobis to manage a blockchain on behalf of their constituents, which ensures consensus and security.

The strength of each stakeholder (cryptocurrency owner) is determined by the amount of cryptocurrency held. The advantage of the DPoS is, for example, that consensus can be reached with a small number of validation nodes. This improves overall network performance.

How does crypto staking work?

How does crypto staking works? Remember that the Proof of Stake model (PoS) and Delegated Proof of Stake (DPoS) algorithms require staking to function properly. Participants who block larger amounts increase the likelihood that they will be selected as the next validator in the block. This behavior allows blocks to be produced without the need for complex and expensive mining equipment, such as the ASIC system.

It should be noted that mining cryptocurrencies by means of ASIC systems requires large investments in equipment and that staking has only one requirement, which is investing in a given cryptocurrency and freezing one’s capital. Staking may at first glance remind you of depositing money in a bank, but in this case, frozen assets ensure that the blockchain network functions properly and interest is calculated in cryptocurrencies.

In addition, you should be aware that every PoS blockchain has a specific staking currency. There are networks that use a two-token system where prizes are paid out using a separate token (for example, you are freezing cryptocurrency "x", receiving the cryptocurrency "y" as a prize).

Staking rewards

How are rewards for cryptocurrency staking calculated? Several elements need to be analyzed in order to answer this question. Remember that a blockchain network is not uniform and therefore each part of it can use different methods for calculating rewards. Individual projects offer a variety of rewards. The factors that influence the rewards for staking are:

  • Time of active staking by validator
  • Amount of „frozen” coins
  • Inflation rate of assets
  • Total number of coins staked in the network

Interestingly, some networks reward staking using percentages. Such awards are given to validators as a form of compensation for inflation, which in turn encourages network users to spend coins rather than to store them. How much can You earn from this?

For example, staking of LUNA cryptocurrency offered users only 1,5% per year, and the pledged assets are subject to a 21-day unlock period. Another project that has generated greater interest was Cosmos (ATOM), which offered an annual return on investment of around 8%.

What is a staking pool?

The staking pool is a place where a group of individuals who possess given cryptocurrencies combine them with others to maximize the odds of being selected to review blocks and receive rewards funds (crypto holdings). Simply put, the staking pools are a place where group staking takes place. By combining stakes, users of a staking pool share rewards in proportion to their contribution.

Staking Pool

Both knowledge and time are necessary to create and maintain a staking pool. Such mining pools are most effective in networks where the entry threshold is sufficiently high. With this in mind, many pool suppliers charge fees on the prizes that the participants receive. Let us remember that there is a safeguard – a minimum balance is always required and is set up to deter malicious stakers.

A significant part of the staking pool requires a low, minimum balance, but this often does not go hand in hand with the extra time in which we could cash out. As a result, joining a pool rather than ‘playing solo’ can be an very attractive solution for those who are just starting to become involved in this form of making money.

What is cold staking?

Cold staking is a process in a wallet that runs without Internet access, just like the ‘cold wallet’. When you stake crypto coins, they are frozen in your wallet. If your wallet is connected to a blockchain network, it is called a hot wallet because it is connected to the internet and becomes vulnerable to attacks. The cold staking process can be done by, i.e using a hardware wallet. It is interesting to note that you can get this effect when when using an air gap wallet. The average reward you can expect with this method is around 2%.

Networks that support "cold staking" provide the opportunity to stake crypto while ensuring that your funds are safely stored offline, howerver it should be noted that this pertains only to users working in cold staking mode. If the stakeholder transfers their assets from their wallet, the reward will automatically be waived. Cold staking is a beneficial method for big players who not only wish to focus on protecting their assets as much as possible, but also want to support the network.

Which cryptocurrencies can be staked?

At present, half of the thousands of cryptocurrencies are based on the Proof of stake algorithm. The most popular of these are listed below:

  • XLM
  • DASH
  • NOW
  • NEO
  • BNB
  • ADA
  • ALGO
  • DOT
  • XLM
  • CELO
  • BTS
  • TRON
  • PIVX
  • NEBL

The DPoS consensus algorithm was developed by Daniel Larimer and the main cryptocurrencies that are based on this technology are:

  • TRX,
  • LUNA
  • EOS,
  • XTZ
  • ICX
  • LISK
  • BAND

Given that blockchain and cryptocurrencies are an extremely original and diverse ecosystem, it should be noted that cryptocurrencies have a high potential to become a stable source of income. Staking is a cheaper and simpler method than mining and the staking pool makes the investment process even easier. For this reason, it is useful to know the above-mentioned terms.

Why is crypto staking worthwhile? Because thanks to it crypto investors can obtain particular digital asset. Moreover, crypto staking is also worth looking into, as it builds passive income. It is also worth noting that anyone can stake cryptocurrency and thus acquire potentially more lucrative staking rewards than any bank deposit can offer – and all that at a low minimum amount. Crypto staking is currently one of the most interesting financial solutions in the new technologies sector.

Most viewed

Never miss a story

Stay updated about Nextrope news as it happens.

You are subscribed

What is Account Abstraction?


10 Nov 2023
What is Account Abstraction?

Account abstraction is a new way of thinking about how users interact with blockchains. Instead of using traditional externally owned accounts (EOAs), account abstraction allows users to create and manage their accounts using smart contracts. This has a number of potential benefits, including improved security, enhanced privacy, and increased flexibility.

What is account abstraction?

Account abstraction is a concept that, at its core, aims to simplify the user's interaction with blockchain networks. It is a transformative approach that seeks to mask the technicalities of blockchain operations from end-users. It is making transactions as straightforward as sending an email. Account Abstr. allows users to interact with the blockchain without worrying about the underlying technical details.

How does account abstraction differ from the traditional model?

In the traditional account model, each user has an EOA. EOAs are controlled by private keys, which must be kept secret in order to protect the user's funds. Acc. abstraction allows users to create and manage their accounts using smart contracts.

Historical Context

The journey towards acc. abstraction began with the first generation of blockchain technologies, characterized by their "one-size-fits-all" approach to account management. Bitcoin, for instance, introduced the concept of accounts and transactions in a form that was accessible to tech-savvy individuals but remained perplexing to the layperson. Ethereum expanded on this by introducing smart contracts, which opened the door to programmable transactions but did not alter the fundamental account structure. The idea of acc. abstraction has been discussed in the Ethereum community for several years as a part of various Ethereum Improvement Proposals (EIPs), particularly as a feature to be potentially implemented in Ethereum 2.0. It is a direct response to the need for a more versatile and user-centric design that can cater to a broader audience and spur the widespread adoption of blockchain technology.

The Technicalities of Account Abstraction

Account abstraction is not merely a theoretical construct but a technical innovation with specific mechanisms underpinning its operation. In essence, it alters the way transactions are initiated and executed within a blockchain network.

How Account Abstraction Works

Under traditional blockchain models, initiating a transaction involves an externally owned account (EOA) signing a transaction with a private key. This transaction is then broadcast to the network for validation and inclusion in the blockchain. Account abstraction, however, replaces this process with a more flexible one. Here, every account is a smart contract, and transactions are messages sent through these contracts. These smart contracts can encode complex rules for transaction validation, beyond what EOAs can do, such as multi-signature requirements or conditional transactions based on certain triggers.

The technical crux of account abstraction lies in the smart contract’s ability to define its own conditions for transaction execution. This means that user accounts can have unique security protocols or automated operations without the user needing to understand the underlying smart contract code.

Hey! Are you interested in the latest technologies in the blockchain area? be sure to read the article 'Top Zero-Knowledge Proof Projects to watch in 2023'

The Benefits of Account Abstraction

The implications of account abstraction are profound, offering a range of benefits that can enhance the blockchain experience for users and developers alike.

Improved User Experience

One of the most significant advantages of account abstraction is the improvement it brings to user experience. By abstracting away the complexities of key management and transaction rules, it presents a more intuitive interface for users.

Enhanced Security Features

Account abstraction also allows for the implementation of advanced security measures. Since each account can define its own logic, users can tailor their security settings to their specific needs. For instance, one might set up an account that requires additional verification for transactions exceeding a certain value or restricts withdrawals to certain addresses.

Future Implications

The future implications of account abstraction are vast. As the technology matures, it could become a standard feature of blockchain networks, potentially making the current distinction between user accounts and smart contracts obsolete. This could lead to a new wave of blockchain applications that are both powerful and accessible, bringing us closer to the vision of blockchain technology as a seamless part of everyday life.

Challenges and Considerations

Technical Limitations

One of the primary technical challenges of Acc. abstraction lies in its integration with existing blockchain protocols. Current networks are optimized for the EOA model, and introducing a new account structure necessitates significant changes to the core protocol. This includes modifications to the way transactions are propagated in the network, how gas fees are calculated, and how the state of the blockchain is managed. Ensuring that these changes do not compromise the network's performance or security requires careful planning and extensive testing.

Compatibility with Current Systems

Another consideration is the compatibility of account abstr. with the vast ecosystem of existing blockchain applications and services. Wallets, exchanges, and other services have been built around the traditional account model. Transitioning to an acc. abstraction model will require these services to update their infrastructure, which may be a complex and resource-intensive process. Furthermore, there is a need for standardization across the industry to ensure that different implementations of account abstr. can work seamlessly together.


Acc. abstraction represents a significant leap forward in the quest for a more user-friendly blockchain experience. By streamlining the transaction process and offering enhanced security features, acc abstraction has the potential to make blockchain technology more accessible to a broader audience. However, the path to widespread adoption is not without its obstacles. Technical challenges and compatibility issues must be carefully navigated to integrate it into the existing blockchain landscape.

Key Takeaways

How to Add Gnosis Chain to MetaMask: A Simple Tutorial


03 Nov 2023
How to Add Gnosis Chain to MetaMask: A Simple Tutorial

As the cryptocurrency ecosystem expands, there is an increasing need for various blockchains with distinct capabilities. Gnosis Chain enters the scene, offering a selection of unique characteristics. By integrating Gnosis Chain with MetaMask, users can access a more comprehensive array of decentralized services. We will walk you through the steps to add Gnosis Chain to your MetaMask wallet in this tutorial.


Setting up MetaMask

Before exploring the integration of Gnosis Chain, it is crucial to have MetaMask installed and operational:

  • Download and Install: If you have not done so already, visit the official website to download and install the MetaMask browser extension.
  • Setup Account: After completing the installation, create your account and make sure to remember the provided seed phrase. This phrase serves as your primary means for account recovery, so keep it secure.
  • Secure Your Account: Protecting your MetaMask account is of utmost importance. Use a robust password and never disclose your seed phrase to anyone.

Gnosis Chain

It is always helpful to have a basic understanding before incorporating any new blockchain into your wallet:

  • Gnosis Chain Overview: Gnosis Chain, a rising star in the blockchain world, brings a range of decentralized solutions to the table, such as prediction markets and decentralized trading platforms.
  • Benefits & Features: Among Gnosis Chain's main selling points are its accelerated transaction speeds and potentially lower fees when compared to congested networks.

Tutorial: How to Add Gnosis Chain to MetaMask

In the top right-hand corner of your browser, you'll find the wallet. If pinned, click on the MetaMask fox icon; if not, click the three dots in the top-right corner. The following screen will appear:

An option to expand the wallet to a new browser page is available by clicking "Expand view:"

This action will launch MetaMask in a new tab:

By clicking on the ‘Ethereum mainnet’ in the top left corner, you can add another network. Click ‘Add Network’

Choose option ‘Add a network manually’

Then, input the information below:

Network Name: Gnosis Chain formerly xDai

RPC URL: https://rpc.gnosischain.com

ChainID: 100

Symbol: XDAI

Block Explorer URL: https://gnosisscan.io

After saving the settings, Gnosis Chain will be added to your network.

The Benefits of Adding Gnosis Chain to MetaMask

With multiple blockchains becoming more common, integrating Gnosis Chain with MetaMask offers numerous advantages:

Expanded Capabilities: Accessing Gnosis Chain through MetaMask opens up a collection of exclusive applications and features inherent to this particular blockchain, which may include unique dapps or cutting-edge financial products.

Diversification: The crypto domain is extensive and constantly growing. By incorporating various chains like Gnosis into MetaMask, you broaden your potential investment opportunities and decentralized application experiences, ensuring no opportunities are missed.

Speed & Cost-Effectiveness: Network congestion and high gas fees on established platforms like Ethereum can discourage many users. Gnosis Chain's architecture has the potential to provide relief through quicker transaction times and more affordable fees.

In summary, as the possibilities within the crypto sphere continue to evolve, tools like MetaMask grant users access to this expanding world. By adding chains like Gnosis, users can stay ahead in this decentralized revolution.


By bridging platforms like Gnosis Chain with accessible tools like MetaMask, individuals not only amplify their engagement with decentralized applications but also fortify their position in this expansive realm. The integration of Gnosis Chain to MetaMask epitomizes the evolution of the crypto landscape – a testament to its ever-growing diversity and potential. As we continue to delve deeper into the decentralized future, tools and integrations like these will undoubtedly play a pivotal role in shaping our digital experiences and opportunities. Whether you're seeking more efficient transactions, diverse dapp interactions, or simply a broader understanding of the crypto ecosystem, this guide's steps open doors to a new horizon.